Why Investors Are Optimistic about Lowe’s Fourth-Quarter Earnings



Stock performance

Lowe’s Companies (LOW) is scheduled to post its fourth-quarter earnings before the market opens on February 27. As of February 21, the company was trading at $105.52, which represents a rise of 15.5% since the announcement of its third-quarter earnings on November 20.

In the third quarter, Lowe’s outperformed analysts’ EPS and revenue expectations but failed to meet their SSSG (same-store sales growth) estimate. On December 12, Lowe’s management announced a new $10 billion share repurchase program in addition to the company’s existing program, which had a balance of $4.5 billion as of November 2. Also, the company’s management provided guidance for 2019, which indicated an improvement in the company’s operating margin. Along with these factors, the surge in job growth in January and February, wage inflation, and the Fed toning down its aggressive rate hike stance drove the company’s stock price.

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Year-to-date performance

Last year, Lowe’s stock fell by 0.6%. However, the company has started 2019 on a strong note with its stock price returning 14.2% YTD as of February 21. During the same period, peers Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 11.6%, 9.9%, and 46.5%, respectively. The SPDR S&P Homebuilders ETF (XHB), which invests 22.5% of its holdings in home improvement and furnishing companies, has returned 19.4% YTD.

Series overview

With Lowe’s fourth-quarter earnings around the corner, we’ll look at analysts’ revenue and EPS expectations for the quarter. We’ll also cover management’s guidance for 2018. Will end this series by looking at analysts’ recommendations, and Lowe’s valuation multiple. First, let’s look at analysts’ revenue expectations.


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